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Owners of Nine of Colorado Spring's 10 Largest Hotels Spending
 Upwards of $80 million for Renovations, Meanwhile City Occupancy
 Fell  Last Year to a 13-year Low
By Wayne Heilman, The Gazette, Colorado Springs, Colo.
Knight Ridder/Tribune Business News

Jun. 19, 2005 - The Colorado Springs hotel industry is going through its most significant makeover in more than a decade just as the key business travel market is rebounding.

Since 2003, owners of nine of the city's 10 largest hotels have spent or are in the process of spending more than $80 million to redecorate and upgrade rooms, install the latest electronic gear and upgrade meeting rooms, restaurants and lobbies.

Much of the remodeling is overdue; hotels delayed work after the 2001 terrorist attacks that sent the travel and tourism industry into a tailspin. Now, as the industry recovers, owners are pumping money into hotels to win back big-spending business travelers.

"The comeback we are seeing in business and corporate travel is driving a lot of this spending," said The Broadmoor hotel President Steve Bartolin. "That market has bounced back strongly and that is the market everyone is going after by improving their product."

Hotel occupancy in Colorado Springs last year fell to a 13-year low and the average room rate, which peaked in 2000. The numbers have improved slightly this year, and many hotels are reporting strong summer bookings.

The local hotel industry is important to the Springs economy. Last year it employed almost 5,000 people and generated almost $150 million in revenue from room rentals. That doesn't count revenue from restaurants, catering, banquets and meeting-room rentals.

Whether they are going after the business or leisure traveler, the city's top hotels are locked in a struggle to defend their turf. Developers built dozens of budget and mid-priced, limited-service hotels in the late 1990s. That expanded the local supply of rooms by almost two-thirds, pushing occupancy and room rates lower.

"Our management team is well aware that travelers have many choices. We need to maintain our competitive position in both product and service," said Jackie Duff, general manager of the Embassy Suites Hotel, which will begin a $7 million renovation next month.

Many of the new hotels cut rates to draw guests away from larger, full-service hotels that were beginning to show their age, said Terry Sullivan, president of Experience Colorado Springs, formerly the Colorado Springs Convention and Visitors Bureau.

The distinction between limited- and full-service hotels, which generally feature a restaurant, lounge and lots of meeting space, has blurred in recent years. Chains such as Marriott Courtyard and Hilton Garden Inn are hybrid hotels, offering some of the same amenities as full-service hotels at lower rates.

To fight back, many of the nation's top hotel chains launched plans to make rooms in their full-service hotels more inviting by upgrading beds, offering high-speed wireless Internet access and high-end televisions, said Robert Benton, a Parker-based hotel consultant.

At the same time, full-service chains have been raising some of their quality requirements, which often involves a major renovation including replacing furniture, Benton said. Full-service hotels typically must remodel every seven years to meet those standards, he said.

Virtually every major local hotel has added high-speed wireless Internet access available throughout the property and multiple telephone lines in each room, and most are offering more comfortable beds, more roomy showers and flat-screen televisions, Benton said.

"Since 9/11, all of the major brands have been competing to upgrade their product. When occupancy declines as it has, loyalty declines and travelers look for value. An improved product is a better value," said Gary Upton, general manager of the Sheraton Hotel.

Competition is a big reason that the Sheraton Hotel's owners will spend $8 million during the next three years renovating the hotel's meeting rooms, lobby and hallways. And that comes on the heels of spending $8 million in the past three years to remodel guest rooms.

At the same time, investors have been snapping up hotels in the Springs and across the nation for bargain prices rather than building new properties.

"Why would you build in this market? You are almost guaranteed to lose money," said Larry Vitagliano, managing partner of the Antlers Hilton hotel. "You can buy hotels at less than replacement value, put money into improving the product and generate more revenue."

The Antlers Hilton is a good example. Boston-based Pyramid Hotel Group has spent the equivalent of almost $120,000 a room to buy and remodel the historic downtown hotel. And that was only about a half to two-thirds of what the company would have spent to build a new hotel, Vitagliano said.

The Antlers Hilton and its competitors won't start recouping the money spent on renovations right away. Vitagliano said the Springs hotel market remains soft and many hotels are either barely breaking even or are losing money.

Still, owners must renovate or lose guests.

"This investment by the industry will be paid back over a long period. You have to spend the money to maintain your market share, even in a soft market," Vitagliano said. "You can't afford to not maintain the property because the alternative is even worse."

The renovation trend isn't likely to stop with full-service hotels.

In the next few years, many of the budget and limited-service hotels built in the late 1990s will reach the age where they will need significant renovation, Duff said. Almost half of the city's 14,000 hotel rooms are in budget or mid-priced limited service hotels.

"You will see this continue for the next five or 10 years because this is a very competitive business and everyone wants to be a step ahead of the competition," Duff said.


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Copyright (c) 2005, The Gazette, Colorado Springs, Colo.

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